Calendar Spreads

Calendar spreads are a group of option spreads which involve two options of the same type (two calls or two puts), same strike price, but different expirations. Alternative names for calendar spreads are time spreads or horizontal spreads (as opposed to vertical spreads, which have same expiration but different strikes).

List of Calendar Spreads

Long vs. Short Calendar Spreads

A calendar spread is long if it is long the option with longer time to expiration (and short the option with shorter time to expiration). For example, a position which is long June calls and short March calls (with the same strike) is a long calendar spread.

Conversely, a calendar spread is short if it is short the option with longer expiration (and long the option with shorter expiration). For instance, the inverse position to the example above, which is short June calls and long March calls, is a short calendar spread.

The easiest way to remember this is that the longer expiration option is the same as the entire spread name/direction.

Vertical vs. Calendar Spreads Difference

There are many things which vertical and calendar spreads have in common:

  • The position involves two options.
  • The position is long one option and short the other (hence spread).
  • Both options have the same type (two calls or two puts).
  • Both options have the same underlying asset.

The difference between vertical and calendar spreads is the following:

In vertical spreads, the two options have the same expiration date, but different strikes.

In calendar spreads, the two options have the same strike, but different expiration dates.

This difference is also reflected in the alternative name for calendar spreads – horizontal spreads. The terms vertical and horizontal spreads originated in the way option quotes have traditionally been presented (mainly in print) – with different strikes in rows (vertically) and expirations in columns (horizontally).

Calendar vs. Diagonal Spreads Difference

Another type of option spreads besides vertical and calendar is diagonal spreads.

Those also include two options of the same type and same underlying, one option long and the other short (so far it is the same as both vertical and calendar spreads).

That said, in diagonal spreads, both the strikes and the expirations of the two options are different.

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